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Tuesday, 23 March 2010

“Top politicians should take a pay cut” says the headline for an article reporting on a Massey University survey which probed New Zealanders attitudes to social inequity – and it’s hard to disagree.

The research team headed by Professor Phil Gendall found that half the people surveyed thought Cabinet ministers were paid around $175,000 a year but deserved around $135,000. Those in households earning under $40,000 thought they earned $160,000 but deserved $100,000 while those in households earning over $100,000 or more thought ministers earned $170,000 but deserved $150,000.

In fact our Cabinet ministers are paid $245,000 base salary with plenty of freebies on top. This puts them earning over $100,000 more than people across a broad income range believe they are worth.
There was a time when a politician’s pay was benchmarked against others in the public service such as teachers but that restricted pay increases for politicians who then found a mechanism via the Higher Salaries Commission, which was required to take into account pay rates in the private sector when setting politicians’ salaries.

If public servant means what it says, we should take more than a passing note of this discontinuity between what politicians are paid and what the public believes they should be paid.

And this is not just people having a go at politicians, because the attitudes were replicated for high earners in the private sector as well.

I’ve blogged previously that New Zealand should set a maximum income just as we set a minimum wage and I suggested no one needs to earn more than 10 times the minimum wage. This would put $250,000 as the highest income which could be maintained with a tax rate of 100 per cent on earnings above that figure.

It’s pleasing to see the research results reflecting similar figures. Sixty-two per cent of those surveyed believed income differences in New Zealand are too large with those on low pay being underpaid while those on high incomes were overpaid.

This is the public showing good instincts which is backed up by research which shows that more equal societies benefit everyone – including the rich – with much reduced social problems, better standards of living and happier people overall. (Those in doubt should read The Spirit Level by Richard Wilkinson and Kate Pickett.)

When asked what New Zealand society looks like, most thought (accurately) it was like a pyramid with a small elite at the top and most people grouped at the bottom. The majority thought a much flatter income structure would be better.

This Massey research also dovetails into research carried out by the New Economics Foundation in Britain which considered the social value of the jobs people do as opposed to the artificial market value which prevails today.

They found last year that jobs such as cleaning and childcare were hopelessly undervalued while well-paid jobs such as bankers and advertising executives and accountants were often socially destructive.

They showed that hospital cleaners, for example, created $10 in value for every $1 they were paid while bankers destroyed $7 for every $1 they were paid.

Eilis Lawlor, spokeswoman for the foundation, said it wasn’t just about paying some jobs more and others less. She says, “The point we are making is more fundamental – that there should be a relationship between what we are paid and the value our work generates for society.”

Most people would instinctively agree. It’s time we debated the social value of work rather than consider just what the market will pay. Even our politicians will be better off with less income and less social problems to pretend to worry about.